3 Strategies for eCommerce Success

3 Strategies for eCommerce Success

With 98% accuracy, One Click Retail delivers the industry’s most accurate sales data and 1^st party and 3^rd party business intelligence to brand manufacturers selling on the world’s top eCommerce platforms. Here, Steven Austin, Account Specialist at One Click Retail, provides insight into 3 Strategies for eCommerce Success: Margins, Pack Sizes and Consumer Preferences

A common mistake of brand manufacturers is to think success in store automatically translates into growth online. They use the same product, packaged for the in-store experience without any modification to strategy or buying habits resulting in major problems in margin and customer experience, and disappointed manufacturer consumer and buyers.

Successful brands realise that: not all buyers are the same; online and in-store shopping preferences are different; and third-party sales reveal the balance needed for success on sites like Amazon. To determine optimal eCommerce product offerings, we’ve looked at some of Amazon’s first-party and third-party sellers to come away with three key strategies.

1.    Mind your Margins  

What buyers care most about is margin. The margin they care about differs, however. A buyer for Walmart, for example, looks for “% margin” while their Amazon counterpart measures “penny profit per unit” or “$/unit margin”.

The difference comes down to cost centres. For Walmart all costs are in-store, while for Amazon it’s all about “outbound shipping” to the end customer. What this means for a 1$ pack of gum with 40% margin is that Walmart can spread the store costs on a percentage basis across their stock and maintain a healthy profit margin, while Amazon must add 2$ to ship the gum to their customer and thereby removing any profitability and margin instantly.

Why should a brand manufacturer care whether Amazon makes a profit on their product? In short, if the world’s number one eCommerce platform can’t make a profit off of an item they’re selling, they won’t bother selling it.

One of the easiest ways to increase $/unit margin is to sell more quantity per sellable unit. This allows the “outbound shipping” cost to be spread across a higher Average Selling Price (ASP). In other words, the shipping cost of one pack of gum is $2, but if it’s sold in a pack of 15, the shipping cost decreases to only $0.17 per unit.

2.    Match the Pack Size to Your Customer’s Preference

Online sales are predisposed to larger pack sizes, selling “club” size packs rather than “grocery store” units (single item or small pack sizes). Online shoppers want to stock up and don’t have to worry about carrying heavy loads home. But when is it too much? Buying in bulk requires the space to store the items bought as well as the disposable income to make the higher initial investment.

Over the past six months, the top 100 Disposable Diaper items on Amazon collected a total sales volume of nearly $200 million. These 100 ASINs (or Amazon-specific SKUs) contained an average of 135 diapers, with 1 in 6 of these ASINs being marketed as a “One Month Supply”. Online shoppers are overwhelmingly opting to buy diapers in bulk, and larger pack sizes allow both consumers and brands to save money on the transaction.

Diapers aren’t the only category that has figured this out – the most successful selling products on Amazon like grocery, office products,  sports nutrition and paper products average well above their offline in-store counterparts. Larger pack sizes for certain high-consumption items provide both consumers and manufacturers more bang for their buck.

3.    Benchmark 1P Slumps against 3P Wins

Another way to gauge successful pack sizes is to look at what’s being offered by 3rd party sellers and which of their items are the most successful. Unlike diapers that have a very high consumption rate, toilet bowl cleansers represent a moderate rate of consumer consumption but require a longer-term commitment for storage.

When the 4-pack of a leading toilet bowl cleanser, which was averaging $13,000 in weekly 1P sales on Amazon, became unprofitable for Amazon third-party sales of the 4-pack product (priced at $2 more!) took over sales, even though a 12-pack 1P option was available at a lower cost per unit.

It’s a fact: consumers shop differently online than in stores:

1. Amazon customers who found the 4-pack of toilet bowl cleanser unavailable opted instead for either the 12-pack or a 4-pack from a third-party seller.
2. Bulk is not always best. Most consumers are willing to pay a higher per-unit cost for their preferred pack size.
3. The discontinuation of the 4-pack toilet bowl cleanser as a 1P item suggests that pack sizes of 4 or smaller of toiler bowl cleanser are not profitable enough for 1P sellers.

Amazon started with books for many reasons: optimal pack size and price. Books have:  a high $/unit margin; a good pack size / price vs ship cost; and a great 3P seller group to gauge correct price point. All brand manufacturers selling on Amazon and other eCommerce retailers can accelerate their eCommerce profits by looking at categories like Diapers, Toilet Bowl Cleansers and Books —and understand that what works for their customers in stores doesn’t translate automatically to eCommerce success.

For further information : www.oneclickretail.com